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In today's hypercompetitive global marketplace, a company's pricing policy can make or break the bottom line. Yet a surprising number of firms attempt to increase profits without the aid of a carefully and creatively designed pricing strategy. Now, in this long-awaited book, the world's two leading price experts Robert J. Dolan and Hermann Simon take managers beyond conventional thinking to show how their breakthrough system of "power pricing" will improve the bottom line by an order of magnitude. They destroy popular but not necessarily financially savvy ideas on pricing, such as relying on a standard markup on cost rule. They expose as passive the "strategy" of letting the market or a competitor "set the price." But the key is in what they provide: the tools by which the pedestrian pricer can become a "power pricer" who achieves quantum leaps in financial performance by aggressively implementing sophisticated pricing strategies.
Dolan and Simon combine their international expertise and know-how to reveal the latest breakthroughs in pricing tactics. Drawing on their firsthand experience with firms throughout the world, they make available for the first time the logic behind the actual practices of "power pricers" engaged in fierce global competition. Market segmentation, promotional pricing, competitive strategic pricing, international pricing, nonlinear pricing, interrelated product line pricing, and time-customized pricing are just a few of the crucial concepts which the authors explore and explain when and how to implement. The authors' approach to creating "power pricers" is twofold. They specify the practices of the strategic pricers among the world's most successfulfirms and then lay out a four-dimensional system to attain this level of pricing sophistication and resulting profit improvement. Dolan and Simon draw their portrait of the power pricer in four critical dimensions: viewpoint on pricing, fact file support pricing, tools and scope of analysis, and determination and implementation.
The authors argue that firms must view pricing as a key and highly manageable element in the profit equation, worthy of attention equal to that accorded to sales volume and costs. Companies must have data at their finger tips which are more accurate, timely, relevant, and dissaggregated than their competitors'. Using these data to create a systematic analysis of customers and competitors, companies will be able to create and assess pricing scenarios to achieve long-term profitability.
This targeted, quadrupled approach to transforming the bottom line by managing price leaves no strategy or option unturned. "Power Pricing" is a highly detailed yet practically focused book which will become required reading for business leaders; general managers; marketing, product, and brand managers; accountants, financial managers, and marketing students, world-wide.
"We have to get our prices up." Read the first page
Concordance
Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
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Customer Reviews
If you're responsible for pricing strategy in a mid-size company but don't consider yourself a pricing specialist, you'll find Power Pricing useful. It covers a lot of ground in a nontrivial way.
Power Pricing starts where it should with an economic analysis of price, costs, and profits. I hesitate to use the word "economic" because it too often means "boring", "incomprehensible", or both. The book is neither, and the economics of pricing is half of what you need to know in order to be a smart pricer.
The other half is understanding how customers respond to prices. The book covers several methods of determining price sensitivity, including conjoint analysis, a technique used by sophisticated companies but rarely understood by those of us who are not technical experts. The book's brief overview is understandable even if you have no technical background.
The first part of the book ends with an interesting chapter on pricing and competitive strategy. It's full of examples which clearly illustrate pricing principles.
The second part of the book introduces specific pricing concepts and techniques. Most of the concepts will be familiar, but the book covers some of them at a higher level of sophistication than most of us are accustomed to using. For example, the chapter on price customization breaks the concept into four methods: sorting by product line, by buyer characteristics, by transaction characteristics, and by distribution channel.
We all know about quantity discounts (called "nonlinear pricing"), but do we think in terms of two-part tariffs or two-block tariffs? The book analyzes both, as well as other techniques for giving quantity discounts.
The chapter on product-line pricing is particularly interesting. Are you willing to sacrifice profit on one item in order to make more profit on another How do you determine which products should be considered together when you set prices? How do you know how much a price change in one product affects the sales of another product? Are base products and their add-ons equally sensitive to price changes?
Another interesting pricing decision involves price bundling. How do you put together successful product and price packages? Although this is one of Power Pricing's weaker chapters, you may find some of the tips useful.
The book's chapter covering time customization of prices is more detailed and interesting. Time customization involves duration of price promotions. If you are trying to get loyal users of a competitive product to try your product, is there a best time to do a price promotion and a best length of time over which to run it?
Power Pricing is an interesting and useful book. It explains some fairly technical, sophisticated material in a manner that is understandable, whether or not you have quantitative training. It generally is easy to read, subject to over-use of the ten-n "power pricer" and phrases in German (one of the authors is German).
R.M. (Erik) Gordon is Director of the Center for Retailing Education and Research, Department of Marketing, Warrington College of Business Administration, University of Florida, Gainesville.
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